Breville Being Sued In US, Failed To Disclose Action To Shareholders
24 hours after announcing another record profit it’s been revealed that Breville is being sued over the sale of a Joule Sous Vide in the US, the Australian appliance maker failed to disclose this information when they announced their financials yesterday.
The Solomon Lew-backed appliance retailer has been accused of breaching an agreement which was part of an “Operation Hotwater” exercise.
Back in 2014 Breville acquired the Illinois-based Preston Industries’ sous vide product line with Breville agreeing to pay Preston a licensing fee to sell their appliances.
Under the terms of the agreement, Breville also agreed to purchase certain appliance products models from Preston as the products were updated.
Preston alleges Breville went against the terms of its licensing agreement when it ditched the Preston products it had been stocking for newer products called Joule Sous Vide from rival maker ChefSteps.
Yesterday Breville reported a record $64.2 million profit for the first six months of the financial year, boosted by a surge in demand for its various coffee makers, blenders, and juicers from locked-down consumers in both the USA and Australia.
“Unfortunately, Breville essentially allowed the acquired sous vide line to ‘die on the vine’ while acquiring and selling a competing product in an attempt to circumvent its royalty obligations to Preston,” the complaint filed in the US Central District Court of California said.
Sous vide machines act as temperature regulators for the process of sous vide cooking, which involves sealing food inside plastic bags and immersing them in water that is heated to a consistent temperature.
Preston, which is headed up by inventor and avid home cook Phil Preston, alleges it has held the patent for these products since 1983. It is seeking repayment of a 10 per cent royalty on all sous vide appliances sold by Breville since 2019. The devices retail for about $US250 ($320). Breville is defending the claim.
What has upset investors is that Breville failed to disclose the pending legal action when they announced their half-year results yesterday despite knowing about the action.
Breville told investors it would drop its dividend by 36.6 per cent to 13¢ a share to fund “growth opportunities”, and future dividends would be based on a payout ratio of 40 per cent of profits, rather than 70 per cent.
Breville chief executive Jim Clayton said “We’ve chosen to change the target annual payout ratio to approximately 40 per cent of earnings per share. We believe this will enable us to fund this growth on a cash neutral basis.”
Shares in the retailer fell over 5 per cent in early trade on Tuesday as shareholders reacted to the unexpected dividend cut but recovered to end the session 2.75 per cent higher at $31.35.
They are expected to fall today.